TMCnet News
Altman Vilandrie & Company: Software-as-a-Service Firms May be Overvalued, with Little Opportunity to Justify Valuations Going ForwardSoftware-as-a-Service (SaaS (News - Alert)) providers have enjoyed high valuations relative to their software counterparts despite flat revenue and margin growth, according to a new study released today by strategic consulting firm Altman Vilandrie & Company. Although SaaS providers benefit from the "unconditional love" of many investors, the study outlines the many challenges facing providers - including a big bet on perpetually high growth rates and major market intolerance for price hikes - as the software industry accelerates its transition to SaaS. "The big question we asked was: Is there's light at the end of the SaaS tunnel, or put differently, will SaaS financials start to get more attractive? The answer is a definite maybe," said Altman Vilandrie & Company Director Josh Zaretsky. "While many of these SaaS firms have been operating within a bubble of unconditional love from investors, decelerating revenue growth will force them to adopt more traditional business tactics, like cost-cutting and price increases. However, we found that even those tactics are fraught with hazards in this disruptive market." For one part of the study, Altman Vilandrie & Company tracked eight publicly-traded software companies transitioning to SaaS and found that these firms boosted market capitalizations by an average of 300 percent in five years despite down or flat revenues over the same period. Added Zaretsky: "Does it make sense that a software company transitioning customers from one method of consuming an application to another, SaaS, has in parallel increased its value by 300% in five years?" The paper, which was develped through industry research and interactions with Altman Vilandrie & Company's software, SaaS and IT services clients over the past year, also features a rigorous survey of 700 IT decisionmakers across 15 verticals. Altman Vilandrie & Company worked with survey respondents to determine the impact of price increases across a range of SaaS packages and vendors. Of the 13 application and provider combinations tested, the survey reveals that only Oracle (News - Alert) would not experience a market share reduction after raising prices. On the flipside of that, Salesforce was the only company to see a slight market share drop if it lowered its pricing. Other providers featured in the study include: Microsoft, IBM (News - Alert), Intuit, SAP, Adobe, Atlassian, Autodesk, Sage, Cornerstone, Marketo, NetSuite, New Relic, Workday and Zendesk. Other key findings of the paper include:
Access the full paper here and contact [email protected] with questions or to learn more. About Altman Vilandrie & Company Altman Vilandrie & Company is a strategy consulting group that focuses on the telecom, media, technology and investor sectors. The company's consultants are experienced in strategy, marketing, finance, M&A, technology, regulatory and operations disciplines. Based in Boston, with offices in New York City and San Francisco, Altman Vilandrie & Company enables clients to seize new opportunities, navigate mounting challenges, improve business performance and increase investor value within complex and converging industries. Ninety percent of the boutique firm's operator clients are large- to mid-cap companies including service providers, technology and software developers and media companies. Altman Vilandrie & Company's financial clients include many of the largest and most prominent investors in the telecom, media and technology markets.
View source version on businesswire.com: http://www.businesswire.com/news/home/20171108005971/en/ |